The company’s new long-term contracts are meant to tame its wild cycles, but they might also be putting a cap on its historic profitability.
After a run of more than 700% in the last 12 months, it’s fair to say Micron Technology (MU)’s stock is priced for a lot to go right
The company is capitalizing on a historic, AI-driven memory shortage, posting results that have surpassed records and expectations. Management has even unveiled a new strategy, a series of long-term Strategic Customer Agreements (SCAs), designed to smooth out the pronounced cycles that have long defined this industry. But within that very solution lies what may be the stock’s biggest risk: the possibility that Micron has traded away future upside for today’s stability.
Profitability Is Already At A Historic Peak First, consider the altitude. Micron’s net margin over the last twelve months stands at 41.5%, the highest it’s been in at least five years and a world away from its 3-year average of 1.5%. Its operating margin tells a similar story at 48.4%, far above its 4.5% three-year average.